3 ms·

Unfortunately, large companies can also much more easily engage in rent-seeking behaviour (http://en.wikipedia.org/wiki/Rent-seeking http://en.wikipedia.org/wik

by araes 12y ago

Unfortunately, large companies can also much more easily engage in rent-seeking behaviour (http://en.wikipedia.org/wiki/Rent-seeking http://en.wikipedia.org/wiki/Rent-seeking) which small competitors can't engage in effectively unless they organize as a group (effectively a small business union) Even worse, rent-seeking is often a better use of money than actually innovating in the market you supposedly compete in. If I can disadvantage all of my competitors with horrific regulations that severely penalize small size competitors, then I need to do nothing and rake in the cash. So, its a tired refrain, but one of the other main issues is that our regulatory and governance bodies are just not agile enough to deal with companies that are, and actively manipulate them. In some cases, that can be a benefit, as loopholes or slow response may allow companies to get established before regulation catches up and reams them, but if the big boys (JP, GE, Exxon, Apple, Walmart, ect..) are on the ball, they can effectively kill whole markets as they appear. Just regulate them away.

cratermoon 12y ago
Regulatory capture is the word of the day.
rayiner 12y ago
I've said this in other threads, but I think this angle is overstated by people who underestimate the purely business advantages that come with scale. Look at the tech industry, which historically hasn't had much involvement with regulation and thus little opportunity for regulatory capture. Is Apple using regulations to keep Jolla from succeeding? No. They use their scale to amortize their OS development work over tens of millions of units. They use their scale to invest in manufacturing processes and equipment that allows them to release complex designs that competitors can't match at the same price point. They use their scale to do in house CPU development, etc. People want to believe that the free market means tons of little companies duking it out. They blame consolidation on the government and rent seeking and regulatory capture. But the fact is that there are massive business advantages to being big, and the natural state of the market is in the direction of consolidation (e.g. the trusts back in the day of Carnegie).
- mindcrime 12y ago
  People want to believe that the free market means tons of little companies duking it out. It would be interesting to create an actual free market and see what happens. But the fact is that there are massive business advantages to being big, and the natural state of the market is in the direction of consolidation Keep in mind that the entire notion of a shared stock, limited liability corporation is a legal fiction which exists due to the State. Now one can certainly argue about whether or not the world is a better or worse place with or without corporations, but in a strict sense, corporations are a violation of the idea of a free market. Since one of the main arguments for corporations it they make it easier for people to pool their capital and build large companies, I don't think it's a stretch to suggest that a corporation-free world would be closer to "tons of little companies duking it out".

by araes 12y ago

cratermoon 12y ago

Regulatory capture is the word of the day.

rayiner 12y ago

I've said this in other threads, but I think this angle is overstated by people who underestimate the purely business advantages that come with scale. Look at the tech industry, which historically hasn't had much involvement with regulation and thus little opportunity for regulatory capture. Is Apple using regulations to keep Jolla from succeeding? No. They use their scale to amortize their OS development work over tens of millions of units. They use their scale to invest in manufacturing processes and equipment that allows them to release complex designs that competitors can't match at the same price point. They use their scale to do in house CPU development, etc. People want to believe that the free market means tons of little companies duking it out. They blame consolidation on the government and rent seeking and regulatory capture. But the fact is that there are massive business advantages to being big, and the natural state of the market is in the direction of consolidation (e.g. the trusts back in the day of Carnegie).

mindcrime 12y ago
People want to believe that the free market means tons of little companies duking it out. It would be interesting to create an actual free market and see what happens. But the fact is that there are massive business advantages to being big, and the natural state of the market is in the direction of consolidation Keep in mind that the entire notion of a shared stock, limited liability corporation is a legal fiction which exists due to the State. Now one can certainly argue about whether or not the world is a better or worse place with or without corporations, but in a strict sense, corporations are a violation of the idea of a free market. Since one of the main arguments for corporations it they make it easier for people to pool their capital and build large companies, I don't think it's a stretch to suggest that a corporation-free world would be closer to "tons of little companies duking it out".